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With the market taking a pause after rallying more than 5% off the May 3 low, the question every investor has to contend with is: Does the rally have more steam… or is a pullback imminent?
With the 10-year yield above 3% and global trade issues resurfacing, the argument for the latter has merit.
But there's one technical indicator I follow that's flashing a bullish sign; it tells me more upside is likely.
Small-cap leadership is an indication of a healthy market.
I consider it a reliable "risk-on" indicator that reflects investor willingness to buy stocks based on a perceived increase in risk value.
More risk here adds up to more reward…
Strong Bull Markets Are Led by Small-Cap Stocks
And that's exactly what we've been seeing for the past three months, as shown in the chart below.
About the Author
Chris Johnson is a quant - he's obsessed with building and perfecting mathematical models that allow him to predict, with startling accuracy, the direction of the markets, entire sectors, and individual securities. For the last year, he's been researching and building a new system that lets him move swiftly in and out of the hottest stocks in the market for life-changing gains - entirely on his own terms. The results of his newly-minted Night Trader system are nothing short of amazing.
Chris also contributes to Money Morning as the Quant Analysis Specialist.